China services growth accelerates in April as domestic demand strengthens

China’s services sector sent two different signals in April, with a private survey showing stronger expansion even as the official gauge slipped back into contraction. The RatingDog China General Services purchasing managers’ index rose to 52.6 from 52.1 in March, staying above the 50 level that separates growth from decline and pointing to firmer domestic demand.

The same survey showed why the picture still looks fragile. New business strengthened and total new business rose for a 40th straight month, the second-longest uninterrupted expansion in the survey’s history, but new export business fell for a second consecutive month. That split suggests Chinese service firms are leaning more heavily on consumers at home while overseas demand remains weak.

The broader composite reading was also more upbeat. The Composite PMI Output Index climbed to 53.1 in April from 51.5 in March, the second-fastest pace of expansion since May 2024. Even so, service providers cut staffing for a third straight month and reduced selling prices for a second month as companies tried to attract clients in a market where demand is improving, but not enough to restore pricing power.

Costs are still working against margins. Input-price inflation accelerated to its highest level so far this year, with firms pointing to higher oil, fuel and freight expenses linked to conflict in the Middle East. That matters for Chinese companies already facing soft orders and cautious household and business spending, because it limits how much of any pickup in sales can fall through to profit.

The private reading contrasted sharply with China’s official non-manufacturing PMI, which came in at 49.4 in April, down from 50.1 in March. The official service-sector business activity sub-index was 49.6, below the expansion threshold and down from 50.2 a month earlier. Yet the official service-sector expectations index rose to 55.4, suggesting firms remained confident about the months ahead even as current activity weakened. Wholesale, retail and resident services were subdued, while railway transport, postal services and telecom, broadcasting and satellite transmission services stayed in a high-prosperity zone.

For policymakers in Beijing, the divergence is the key message. One survey says services are still expanding and domestic demand is improving; the other says activity has slipped back into contraction. For global markets and exporters, that split argues for caution. China’s recovery remains uneven, supported by internal services demand in some areas but still exposed to fragile external demand, higher costs and geopolitical shocks that can quickly erase gains.